Nigeria PMI - September Data Indicates Slowing Momentum

Purchasing Managers’ Index (PMI) numbers from the
Central Bank of Nigeria (CBN) indicate that the economy expanded at a slower
pace in September, with Manufacturing PMI dropping from 57.1 to 56.2 and
non-Manufacturing PMI dropping from 58.0 to 56.5.

Manufacturing PMI fell to its lowest value this year,
with all sub-indices bar Supplier Delivery Times (up from 55.9 to 56.1)
expanding at a slower pace. It is important to note that improving Supplier
Delivery Times sometimes indicate lower economic activity which eases pressure
on logistics. Thus, with businesses also scaling back their purchases of raw
materials after ramping up in recent months, signs point towards slowing
momentum in the manufacturing sector.

The dip in non-Manufacturing PMI was also material,
making it the second lowest value this year as all sub-indices fell month-on-month.

Key feature: When will
Real Estate & Trade turn?

According to CBN PMI data, the Real Estate and
Wholesale Trade sectors have expanded for the past thirteen and sixteen months
respectively. However, real output data has remained in the doldrums, with the
respective sectors contracting 4% y/y and 2% y/y in Q2’18. Moreover, the Real
Estate and Trade sectors of the economy shrank 4% y/y and 1% y/y in 2017
respectively. These sectors are considered bellwethers of economic sentiment
and their sustained negative performance points to an underlying weakness in
the Nigerian economy.

No change expected in
Q4

September PMI data gives us early indications of
slowing economic momentum, which comes as little surprise ahead of the 2019
elections. The only saving grace would be an aggregate demand boost from
electioneering activities, though we would not expect this effect to be
broad-based. Meanwhile, drawing from PMI data, oil production, and other
indications of activity in agriculture and services, we estimate Q3’18 GDP
growth of 1.2% y/y, partly weighed by a relatively stronger base in Q3’17.